Lost amid last week's cascade of major Supreme Court decisions was the news that the court will hear a case challenging the legality of President Barack Obama's recess appointments to the National Labor Relations Board. Importantly, this case will also cover the president's appointment of the current director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray.
Since the organization's creation, critics have been concerned by the lack of any meaningful accountability or oversight, and Cordray's appointment without a thorough congressional vetting did nothing to soothe those concerns. The court's decision is an important first step, but hardly the only one required, in bringing to heel a government body with the audacity to think it's wise enough to do for consumers what they can't do for themselves.
Though it's an organization that's supposed to represent consumers, the CFPB doesn't have to ask those consumers' elected representatives for annual funding. This shields the agency from lawmakers' most awesome means of accountability — the power of the purse. Instead, the CFPB is entitled to 12 percent of the Federal Reserve's annual operating expenses, which in fiscal year 2013 totaled $597.6 million.
Any amount requested under that cap is automatically granted, and neither Congress nor the White House can say otherwise. That leaves the CFPB with ample room to spend handsomely on itself. For example, the agency budgeted $95 million in the current fiscal year to renovate its downtown Washington headquarters. That figure is more than the entire annual construction and acquisition budget for the General Services Administration for all other federal buildings combined.
But that's just the beginning. Unlike most other federal agencies, the CFPB is not required to abide by salary limits established by the Office of Personnel Management. That's why 58 employees have higher salaries than executive cabinet secretaries, and over 60 percent of its 1,200-employee workforce earns over $100,000 a year — before bonuses.
Even lowly interns command an average $18.45 per hour.
These are exactly the types of budgetary excesses that, if committed by other federal agencies, would receive intense congressional scrutiny during the annual appropriations process. But even if Congress does have suspicions about reckless spending within the CFPB, the organization's founding legal charter prohibits congressional appropriators from altering its half a billion dollar budget
This lack of accountability is all the more troubling when considering the business track records of its Consumer Advisory Board (CAB) members. As reported recently in the Washington Examiner, nine of the board's 25 members either presided over recent bank failures or previously reported substantial losses in their operations of nonprofit organizations. This from a group tasked with, among other things, providing financial advice to low-income families.8 comments on this story
A number of the Advisory Board's members also come from organizations the CFPB actively regulates. This coziness was on full display last September when the CFPB awarded a $1.3 million contract to a corporation on whose board a CAB member also sits. These are exactly the types of relationships that would draw congressional ire were the CFPB accountable to it, or anyone else for that matter.
Taken together, all of this illustrates that the CFPB's problems are far greater than just its director. While a court decision that required Director Cordray to be approved by Congress would undoubtedly be a step in the right direction, critics would do well to keep their eye on the bigger prize: Instituting structural reforms that increase accountability and oversight at the CFPB.
Michael Marlow is a professor of economics at California Polytechnic State University.